The Bank of Ghana (BoG) says it is reviewing the effectiveness of reforms introduced to strengthen monetary policy transmission in the banking sector.

Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, says the Monetary Policy Committee (MPC) will assess whether the new uniform Cash Reserve Ratio (CRR) requirement introduced in May has improved the alignment between short-term market rates and the policy rate.

The central bank replaced the previous dynamic Cash Reserve Ratio framework with a uniform requirement of 20 percent to be held in domestic currency at its 130th Monetary Policy Committee meeting.

 "At the 130th meeting, the Committee held the Monetary Policy Rate at 14.0 percent and, in the same decision, replaced the dynamic Cash Reserve Ratio framework with a uniform requirement of 20 percent to be held in domestic currency", he said.

According to the Governor, the review has become necessary after the Committee observed persistent stickiness in the interbank rate at the lower end of the policy corridor.

"At the 130th meeting the Committee noted that the interbank rate had shown persistent stickiness at the lower bound of the policy corridor, and the revised Cash Reserve Ratio framework was designed to address this."

He noted that staff of the Bank of Ghana will present data to determine whether the reforms have achieved their intended objective and whether additional adjustments to the operational framework may be required.

"Staff will need to establish whether the alignment of short-term market rates with the policy rate has since improved, and whether further refinements to the operational framework are warranted."

The outcome of the assessment is expected to influence discussions on the appropriate monetary policy stance as the Committee concludes its 131st meeting this week.

Dr. Asiama maintained that ensuring an effective monetary policy transmission mechanism remains critical to preserving price stability and sustaining confidence in the economy.

The Monetary Policy Committee is expected to announce its latest policy decision on Wednesday, with market participants closely watching whether the recent rise in inflation and changing liquidity conditions will warrant any adjustment to the current policy stance.